Amidst allegations of harassment in the workplace, Activision Blizzard performed well in Q2, but is this company still a good investment?
Aug. 6, 2021
Activision Blizzard (NASDAQ: ATVI) is a popular game publishing company. It is the publisher of many well-loved franchises such as ‘Call of Duty’, ‘Overwatch’, ‘World of Warcraft’, ‘Crash Bandicoot’, and ‘Spyro’.
But with its recent workplace harassment controversy, has this company shot itself in the foot, or will it continue to grow despite the recent outrage? We lay it all out and look at if Activision Blizzard is a good investment.
The bull case for Activision Blizzard
After a stellar 2020, Activision Blizzard has continued to deliver strong results this year, remaining among the top gaming stocks to buy. Much of this is down to its free-to-play offerings across mobile, PC, and console. Indeed, this re-direction has helped the ‘Call of Duty’ franchise to add over 100 million players in just over a year. As such, the second-quarter report stated a net revenue of $2.3 billion, which is up 19% year-over-year (YoY). Earnings per diluted share came in at $1.20, as compared with $0.81 for the second quarter of 2020. The company has shown continued growth and has even raised its outlook for the year overall.
Activision Blizzard’s mobile games are extremely popular. Indeed, ‘Call of Duty Mobile’ is on track for consumer spending to exceed $1 billion on its own. With many younger generations preferring mobile games to the more traditional PC or console platforms, this is an area where growth will continue down the line. For the King segment of its business, this is particularly important right now as the ‘Candy Crush’ publisher should be able to capitalize on this growth.
Furthermore, due to the ongoing harassment suit, Activision Blizzard has recently replaced the now ex-president of the Blizzard Entertainment segment with two impressive veterans. Jen Oneal is the first woman to lead this studio and she has 18 years working with Blizzard to her name, having formerly headed Vicarious Visions studio. Mike Ybarra, the other half of this dynamic duo has worked with Microsoft as a senior executive for the Xbox team. These two know the industry inside and out and along with their promises for an inclusive workplace environment, they will surely lead Blizzard to higher growth overall.
The bear case for Activision Blizzard
The ongoing harassment lawsuits against Blizzard Entertainment are a black mark. The allegations state that the company has, at the very least, turned a blind eye to sexism and harassment in the workplace. The initial response from the company was to downplay these allegations which have angered both workers and shareholders. As such, Activision Blizzard is now being sued not only by California’s Department of Fair Employment and Housing but also by shareholders who have initiated a class-action lawsuit. This could be quite costly in the long run.
The whole situation has also reduced productivity within the company. Jeff Hamilton, a senior system designer for ‘World of Warcraft’ stated that employees have been so affected by the controversy that “almost no work” was being done on the game. A lessening in productivity could seriously impact next quarter’s results and, as such, Activision Blizzard will need to keep an eye on this moving forward.
This popular games publisher might have had a great 12 months financially, but it has many competitors, the majority of which are not going through a highly public harassment and discrimination suit. Its competitors include Take-Two Interactive, Epic Games, Ubisoft, Nintendo, and Riot Games. Indeed, with Activision Blizzard now seeming to have lost its biggest non-gaming sponsor, T-mobile, maybe the court of public opinion is turning on the company. With plenty of other options to choose from, this could worry many ATVI investors.
So, should I buy Activision Blizzard Stock?
For now, the stock seems like it could be a risky buy, particularly with the ongoing lawsuits. However, the company has taken steps to eliminate the sexist and discriminatory workplace culture and, as such, it might come out the other side all the better for it.
With its continued revenue growth and the expansion of its mobile free-to-play games, Activision Blizzard could be a good long-term option for any investor.
- When did Activision buy Blizzard?
In 2008, Activision and Vivendi Games merged to become Activision Blizzard. Then, in 2013 Activision Blizzard purchased 429 million shares from Vivendi, essentially buying them out. As a result, Activision Blizzard kept the Blizzard segment and it became a completely independent company.
- Where is Activision Blizzard located?
Activision Blizzard and Activision Publishing are headquartered in Santa Monica, California,
- Who is the CEO of Activision Blizzard?
Bobby Kotick. He is also the founder of the Call of Duty Endowment.
If you want to stay ahead of the curve and invest in growing industries such as gaming, MyWallSt’s got you covered with a shortlist of market-beating stocks, so you too can accumulate long-term wealth. Simply click here for free access today.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.